B-36398, DEC 7, 1948

B-36398: Dec 7, 1948

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THERE WAS TRANSMITTED HERE FOR CONSIDERATION YOUR LETTER OF SEPTEMBER 8. WERE THE SUBJECT OF DECISION DATED JUNE 6. IN WHICH THE SECRETARY OF WAR WAS ADVISED THAT THE CHANGE ORDER IN QUESTION. ALTHOUGH THE FACT THAT THE AMOUNT IN QUESTION WAS ERRONEOUSLY PAID TO THE CONTRACTOR IS CONCEDED IN YOUR LETTER. 001.06 OF WHICH WAS REFUNDED IN CASH. TO SHOW THAT THE SUBJECT CONTRACT WAS INCLUDED IN RENEGOTIATION PROCEEDINGS. WOULD HAVE THE EFFECT OF REDUCING THE EXCESS PROFITS BY APPROXIMATELY THE AMOUNT OF THE OVERPAYMENT. THE CONTRACT REVENUES WOULD HAVE BEEN REDUCED ACCORDINGLY. YOU RAISE THE QUESTION AS TO WHETHER THAT PORTION OF THE SETTLEMENT AS IS REPRESENTED BY THE AMOUNT OF THE CASH COLLECTION WHICH WAS DEPOSITED INTO THE TREASURY TO THE MISCELLANEOUS RECEIPT ACCOUNT.

B-36398, DEC 7, 1948

PRECIS-UNAVAILABLE

COLONEL C. A. FRANK, F. D., U.S. ARMY:

BY FIRST INDORSEMENT DATED OCTOBER 1, 1948, FROM THE CHIEF OF FINANCE, THERE WAS TRANSMITTED HERE FOR CONSIDERATION YOUR LETTER OF SEPTEMBER 8, 1948, FILE FINKF-E 132.6/1545 (BRADSHAW, R. H.), IN WHICH YOU, AS CUSTODIAN OF THE RETAINED ACCOUNTS OF COLONEL R. H. BRADSHAW, FINANCE DEPARTMENT, REQUEST A REVIEW OF NOTICES OF EXCEPTION PERTAINING TO VOUCHERS 132757, OCTOBER 1942, AND 255616, FEBRUARY 1943 ACCOUNTS OF THE SUBJECT DISBURSING OFFICER AND A FINAL DETERMINATION AS TO WHETHER AN ACTUAL INDEBTEDNESS EXISTS.

THE REFERRED-TO EXCEPTIONS IN THE ACCOUNTS OF COLONEL BRADSHAW, TOGETHER WITH THE EXCEPTION ON VOUCHER 2799, SEPTEMBER 1942 ACCOUNT OF COLONEL CLAY ANDERSON, REPRESENTING OVERPAYMENTS IN THE TOTAL AMOUNT OF $20,946.86 UNDER CONTRACT W-1105-ENG 3927 WITH BASICH BROTHERS, WERE THE SUBJECT OF DECISION DATED JUNE 6, 1946, B-36398, IN WHICH THE SECRETARY OF WAR WAS ADVISED THAT THE CHANGE ORDER IN QUESTION, PURPORTING TO INCREASE THE CONTRACT CONSIDERATION, BY INCREASING THE UNIT PRICE FOR HAULING GRAVEL FROM $1 TO $1.28 PER TON, COULD NOT BE ACCEPTED AS IMPOSING ANY OBLIGATION ON THE UNITED STATES TO MAKE PAYMENT IN EXCESS OF THAT FIXED BY THE ORIGINAL AGREEMENT, AND THAT CREDIT MAY NOT BE ALLOWED IN THE ACCOUNTS OF THE DISBURSING OFFICERS FOR THE AMOUNT OF THE OVERPAYMENT.

ALTHOUGH THE FACT THAT THE AMOUNT IN QUESTION WAS ERRONEOUSLY PAID TO THE CONTRACTOR IS CONCEDED IN YOUR LETTER, YOU STATE THAT THE FINANCE OFFICE DOES NOT CONCUR IN THE STATEMENT MADE IN THE NOTICES OF EXCEPTION THAT NOTHING IN THE RENEGOTIATION LAW AUTHORIZES RETENTION BY THE CONTRACTOR OF ANY AMOUNTS NOT PROPERLY FOR PAYMENT UNDER THE TERMS OF THE CONTRACT, AND YOU BASE YOUR REQUEST FOR REVERSAL OF THE ACTION BY THIS OFFICE ON THE GROUND THAT THE AMOUNT OF THE OVERPAYMENT HAS, IN EFFECT, BEEN RECOUPED BY THE GOVERNMENT BY VIRTUE OF THE RENEGOTIATION OF CERTAIN CONTRACTS WITH BASICH BROTHERS FOR THE PERTINENT PERIOD AND A RESULTANT REPAYMENT OF $90,000 AS EXCESSIVE PROFITS, $33,001.06 OF WHICH WAS REFUNDED IN CASH. IN THIS CONNECTION YOU FURNISH EVIDENCE, PREVIOUSLY SUBMITTED IN REPLY TO EXCEPTIONS TO THE PAYMENTS IN QUESTION, TO SHOW THAT THE SUBJECT CONTRACT WAS INCLUDED IN RENEGOTIATION PROCEEDINGS, WHICH CULMINATED IN RENEGOTIATION AGREEMENT W 42-032-ENG-PAS-598, DATED DECEMBER 28, 1943, AND THAT A RECOMPUTATION OF EXCESSIVE PROFITS FOR THE FISCAL YEAR INVOLVED, EXCLUDING THE OVERPAYMENT FROM BOTH THE CONTRACT REVENUES AND THE GROSS JOB PROFITS, WOULD HAVE THE EFFECT OF REDUCING THE EXCESS PROFITS BY APPROXIMATELY THE AMOUNT OF THE OVERPAYMENT.

YOU STATE IN YOUR LETTER THAT IF THE CONTRACTOR HAD MET THE DEMAND OF THE CONTRACTING OFFICER AND REFUNDED THE SUM RECEIVED UNDER THE CHANGE ORDER INVOLVED, OR IF THE INCREASED UNIT PRICE THEREIN HAD NOT BEEN AUTHORIZED IN THE FIRST INSTANCE, THE CONTRACT REVENUES WOULD HAVE BEEN REDUCED ACCORDINGLY, WITH A CORRESPONDING REDUCTION IN THE AMOUNT OF THE RENEGOTIATION SETTLEMENT. IN VIEW THEREOF, YOU RAISE THE QUESTION AS TO WHETHER THAT PORTION OF THE SETTLEMENT AS IS REPRESENTED BY THE AMOUNT OF THE CASH COLLECTION WHICH WAS DEPOSITED INTO THE TREASURY TO THE MISCELLANEOUS RECEIPT ACCOUNT, "REIMBURSEMENT, EXCESSIVE PROFITS ON RENEGOTIATED CONTRACTS," WAS PROPERLY ACCOUNTED FOR. IN ORDER TO REPAY THE APPROPRIATION FROM WHICH THE ERRONEOUS DISBURSEMENTS IN THE TOTAL AMOUNT OF $20,946.86 WERE MADE, YOU REQUEST AUTHORIZATION FOR AN ACCOUNTING ADJUSTMENT CHARGING THE ACCOUNT TO WHICH THE CASH REPAYMENT OF EXCESSIVE PROFITS WAS DEPOSITED AND CREDITING THE MISCELLANEOUS RECEIPT ACCOUNT, "REPAYMENT, LAPSED APPROPRIATIONS."

THERE IS NOTHING CONTAINED IN THE RENEGOTIATION LAW, SECTION 403 OF THE SIXTH SUPPLEMENTAL NATIONAL DEFENSE APPROPRIATION ACT, 1942, AS AMENDED, 56 STAT. 982, WHICH INDICATES THAT IT WAS INTENDED TO AFFECT IN ANY WAY THE STATUTORY DUTY OF THIS OFFICE TO DETERMINE WHETHER PAYMENT MADE TO GOVERNMENT CONTRACTORS ARE IN ACCORDANCE WITH THE TERMS OF THEIR CONTRACTS AND OTHERWISE ARE PROPER. WHILE IT MAY BE THAT THE RENEGOTIATION OF THE BASICH BROTHERS' CONTRACTS FOR THE PERIOD INVOLVED RESULTED IN THE CASH REFUND TO THE GOVERNMENT OF A SUBSTANTIAL SUM AS EXCESSIVE PROFITS, IT HAS BEEN HELD BY THIS OFFICE THAT, SINCE THERE IS NOTHING IN THE RENEGOTIATION ACT TO INDICATE ANY INTENTION TO ABROGATE OR OTHERWISE INTERFERE WITH THE JURISDICTION OF THE SEVERAL AGENCIES OF THE GOVERNMENT TO REJECT ILLEGAL OR IMPROPER CLAIMS OR TO RECOVER BACK AMOUNTS ILLEGALLY OR IMPROPERLY DISBURSED FROM FUNDS AVAILABLE TO THEM, THE QUESTION AS TO WHETHER OR NOT A PARTICULAR ITEM IS A PROPER PAYMENT FROM APPROPRIATED FUNDS UNDER A FIXED PRICE CONTRACT MUST BE DETERMINED ON THE BASIS OF THE TERMS OF THE CONTRACT, INDEPENDENTLY OF ANY AGREEMENT BETWEEN THE CONTRACTOR AND AN ADMINISTRATIVE ESTABLISHMENT UNDER THE RENEGOTIATION ACT.

MOREOVER, SINCE PROVISION IS MADE IN SECTION 403 (C)(2) OF THE SAID ACT, AS AMENDED, 56 STAT. 983, THAT ALL MONEY RECOVERED BY WAY OF REPAYMENT OR SUIT SHALL BE RECOVERED INTO THE TREASURY AS MISCELLANEOUS RECEIPTS, THERE IS NO AUTHORITY OF LAW FOR RELIEVING THE CONTRACTOR OF THE INDEBTEDNESS DUE TO OVERPAYMENTS UNDER CONTRACT W-1105-ONG-3927 BY CHARGING THE ACCOUNT TO WHICH THE REPAYMENT OF EXCESSIVE PROFITS WAS DEPOSITED AND CREDITING THE APPROPRIATION, NOW LAPSED.

SINCE, THE RECORD IN THIS CASE SHOWS THAT THE AMOUNT INVOLVED REPRESENTS AN ILLEGAL PAYMENT TO THE CONTRACTOR BY THE GOVERNMENT, IT FOLLOWS THAT SUCH IMPROPER OR ILLEGAL PAYMENT SHOULD BE RETURNED TO THE GOVERNMENT REGARDLESS OF THE EXTENT OF PROFIT THE CONTRACTOR REALIZED FROM ITS OVERALL BUSINESS AND, CONSEQUENTLY, THAT THIS OFFICE WOULD NOT BE WARRANTED IN THE ALLOWANCE OF CREDIT IN THE ACCOUNTS OF THE DISBURSING OFFICERS ON THE BASIS OF THE FACTS PRESENTED BY YOU.

HOWEVER, THE RECORDS OF THIS OFFICE SHOW THAT THE EXCEPTION ON VOUCHER 255616, IN AN AMOUNT LESS THAN $2,500, HAS BEEN REMOVED UNDER THE PROVISIONS OF THE ACT APPROVED JULY 26, 1947, PUBLIC LAW 248, 61 STAT. 493 BUT SUCH ACTION DOES NOT RELIEVE THE CONTRACTOR OF HIS LIABILITY IN THE MATTER.